The 2002 National Electric Code, the standard for electrical safety in buildings, presents a legal and financial risk for owners who do not understand the significance of one key amendment addressing the hidden costs associated with the mandatory removal of abandoned cables. Described by some industry experts as the most significant round of changes to the code since 1975, the amendment requiring the removal of abandoned cables from buildings was established to reduce the effects of harmful materials in older cables, as well as to prevent electrical fire hazards.
NEC-2002 clearly states that “abandoned cables shall not be permitted to remain” in ducts or other horizontal and vertical riser and air-handling spaces, but the code is silent on the issue of who bears the burden of removal. This amendment is of special importance to local jurisdictions that have already implemented NEC-2002 as the standard for electrical cabling.
While there is some confusion surrounding the interpretation of “abandoned cable” as defined by NEC-2002, owners should be aware that cables that are not in use and not tagged for future use may be required to be removed regardless of age, condition, future utility or value.
But abandoned cables don't necessarily mean unusable cables. Private consultant Darlene Pope, founder and principal of CRE Partners of Sterling, Va., notes that much of the wiring infrastructure left by bankrupt telecommunications companies, for example, can be put to use by the owner or other telecom service providers.
What's at Stake for Owners?
A hypothetical case involving tenant turnover illustrates how NEC 2002 can adversely impact building owners. Imagine a 14-story office building located in a jurisdiction that has adopted NEC-2002. A tenant on the third floor has installed an antenna or satellite dish on the roof and, as a result, there are various combinations of cables in the vertical riser running from the third floor to the roof. If the tenant vacates the property or removes the rooftop equipment, the wires and cables that are left in the vertical space unconnected at both ends to a connector and not identified for future use by a tag are considered “abandoned” under NEC-2002.
If the building owner later negotiates with a new tenant for that same third-floor space and plans renovations to the space that require a building permit, the new tenant's installations would be subject to NEC-2002 and the abandoned cable would not be permitted to remain. Since NEC-2002 does not specify who is responsible for removing the cable, it is the building owner who likely will find himself stuck with the removal cost.
Tenants Have the Upper Hand
Many leases do not protect landlords because they do not clearly delineate who should remove or pay for the removal of abandoned cabling when making improvements, changing service or terminating a lease. Most new tenants contend that landlords are obligated to remove abandoned cabling, as it constitutes leftover materials from previous occupants. There is no national “prevailing view,” but in tenant-friendly markets the cost of removing abandoned cabling will be borne by landlords, perhaps for no other reason than to lease the space.
Debates over the cost of compliance — which can add 15% to 30% to the cost of installing communications cables — have slowed or stalled some lease negotiations. In one Texas case, the cost of replacing the old cable rose by 50%, causing the prospective tenant to end negotiations and seek a lease in a newer building less encumbered by old, abandoned cables and wires.
One interpretation of NEC-2002 may be that landlords are required to tag wiring for future use, resulting in a need for extensive physical surveys of telephone closets and audits of existing telecommunications cabling. As a result, clever landlords will amend their leases and pass the cost on to tenants as an operating expense.
In addition, landlords should insert a lease provision stating the landlord will remove abandoned cabling provided that the tenant agrees to remove its cables upon vacating the premises. If landlords do not want cabling removed, the lease should provide that tenant must tag cables for future use and leave them in place.
Knowledge is Power
Because NEC-2002 does not become mandatory in a jurisdiction until that jurisdiction amends its local code to incorporate changes, these new standards have yet to be adopted in many communities. For example, building officials in the Dallas area are applying the standards, but not in the District of Columbia and larger counties in Maryland and Virginia. It is important for tenants and owners to understand their state and local regulations.
The eventual impact of NEC-2002 will vary from jurisdiction to jurisdiction. By providing protection in leases, landlords will avoid the hidden costs caused by NEC-2002.
Nelson Migdal is a partner in the Washington, D.C. office of Holland & Knight LLP. Michael Beckwith is completing his studies at Ohio State University.